Financing and Leasing

Abstract

Financing means acquiring the money resources for something. Earlier in the book, we discussed the idea that assets should, in general, be financed over their expected useful lives. By way of illustration, we contrasted the reasonably sensible practice of using a 25-year loan to finance the purchase of a long-term asset such as a house, with the slightly less sensible idea of using a 5-year loan to finance a 3-week holiday. In this chapter we shall, primarily, be discussing a method of financing that is of particular importance for medium-term assets, such as IT assets, namely leasing. First, however, we shall consider financing in general in the context of the purpose of business.